Second Christmas

One of the perversions that results from our current income tax (and the magic of withholding) is that which occurs around this time every year. It's subliminal, but it's there. It's the subconscious association that people have with their tax refunds... and the depressing notion that practically no one can tell you how much federal income tax they paid in 2007. Only how much they got back. And what they bought with what they got back. See where I'm going?

Most people will use a portion of a large refund to pay down some debt, but most will also treat the one-time windfall as an opportunity to treat themselves to something nice. A new depthfinder for the boat. A new patio set. New countertops. Although I have no studies to point to that would substantiate this, is it possible that, at least subconsciously, American taxpayers have come to associate tax season with goodies? Do most American's view the US Income Tax withholding system as a February ATM?

If not, then at a minimum the magic of withholding is so painful to observe as a conservative. Where the true cost of government is masked to the taxpayer by the US Treasury before they even see their money.

If so, what a shame. What a shame that Americans have come to view, in a favorable light, the fact that the US government has spooked them into keeping a $4,000 savings account that pays 0% interest, and can't be withdrawn until February of the next year. Keep your own savings account, folks. Citibank and CapitalOne have Online Accounts that pay close to 3.5-4%. Have some money direct deposited there and "withhold" from yourself. Use it to pay your tax in February if you need it.

The only problem with that is the other infuriating thing. That Congress has made the withholding and general income tax rules in general so difficult to understand that most people just say 'screw it' and play it safe. And it's really hard to blame them. No one wants to get in between Chuck Grassley and his ethanol subsidies or Hillary Clinton and her Woodstock Museum. But your accountant could certainly help you. My goal every year is to have my federal payment offset my state refund.

I'd rather the state hold my money interest free because they actually have to balance their budget and can't just print money and inflate away our purchasing power.

Folks, pay attention to one of the most expensive part of your lives. Go look at boring, old line 44 on your most recent income tax return (Form 1040) and ask yourself if you have paid enough attention to how that money (and your kids money) is being spent. If you have looked at it already this year, then you could automatically rule out half of the presidential field that thinks that you're not paying enough. And you'd probably like how tough on spending McCain has been at times, but still a little nervous about his vote against the Bush tax cuts.